Moody’s warn no-deal Brexit likely to damage UK life insurers capital, growth and profit

Ratings agency Moody’s has warned that a no-deal Brexit is likely to damage the capital, growth and profit of UK life insurers in the short to medium term, in its latest report for investors.

However, the agency also said that its “current base case” is still that the European Union and the UK will reach an agreement.

Dominic Simpson, VP-Sr credit officer at the firm, explained that in the event of no-deal: "First, financial market volatility may erode capital and pressure investment income. Second, a hit to the UK economy may reduce revenue and earnings potential."

The agency said that operational risk will be “manageable” as most UK life groups that operate in continental Europe do so via local subsidiaries. These will be able to continue operating even though their UK parents would lose their EU passporting rights.

In 2018, most UK life insurers increased their operating profit again, and Moody's expects the sector to continue to benefit from rule changes giving savers more freedom to manage their retirement savings, as well as structural shifts such as pensions auto-enrolment, and the move from defined benefits to defined contribution schemes.

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